Krugman - Nobodys Understands Debt (But Now I Do!)

Let's start the New Year by breaking a resolution.  Here we go with Krugman v. Krugman, with yet another illustration of how Krugman's economic theories are dictated by the residency of the White House.  Here is Krugman 2011, in a column titled "Nobody Understands Debt", sharing his newfound enlightenment:

In 2011, as in 2010, America was in a technical recovery but continued to suffer from disastrously high unemployment. And through most of 2011, as in 2010, almost all the conversation in Washington was about something else: the allegedly urgent issue of reducing the budget deficit.

...

Perhaps most obviously, the economic “experts” on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits. People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!

And while they’ve been waiting, those rates have dropped to historical lows. You might think that this would make politicians question their choice of experts — that is, you might think that if you didn’t know anything about our postmodern, fact-free politics.

Let's flash back to one of our nation's "experts" - Paul Krugman, writing in March of 2003, a time when when a weak economic recovery was just underway:

With war looming, it's time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.

...

And that's way too optimistic. The Congressional Budget Office operates under ground rules that force it to wear rose-colored lenses. If you take into account -- as the C.B.O. cannot -- the effects of likely changes in the alternative minimum tax, include realistic estimates of future spending and allow for the cost of war and reconstruction, it's clear that the 10-year deficit will be at least $3 trillion.

So what? Two years ago the administration promised to run large surpluses. A year ago it said the deficit was only temporary. Now it says deficits don't matter. But we're looking at a fiscal crisis that will drive interest rates sky-high.

...

But what's really scary -- what makes a fixed-rate mortgage seem like such a good idea -- is the looming threat to the federal government's solvency.

That may sound alarmist: right now the deficit, while huge in absolute terms, is only 2 -- make that 3, O.K., maybe 4 -- percent of G.D.P. But that misses the point. ''Think of the federal government as a gigantic insurance company (with a sideline business in national defense and homeland security), which does its accounting on a cash basis, only counting premiums and payouts as they go in and out the door. An insurance company with cash accounting . . . is an accident waiting to happen.'' So says the Treasury under secretary Peter Fisher; his point is that because of the future liabilities of Social Security and Medicare, the true budget picture is much worse than the conventional deficit numbers suggest.

Of course, Mr. Fisher isn't allowed to draw the obvious implication: that his boss's push for big permanent tax cuts is completely crazy. But the conclusion is inescapable. Without the Bush tax cuts, it would have been difficult to cope with the fiscal implications of an aging population. With those tax cuts, the task is simply impossible. The accident -- the fiscal train wreck -- is already under way.

How will the train wreck play itself out? Maybe a future administration will use butterfly ballots to disenfranchise retirees, making it possible to slash Social Security and Medicare. Or maybe a repentant Rush Limbaugh will lead the drive to raise taxes on the rich. But my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt.

And as that temptation becomes obvious, interest rates will soar. It won't happen right away. With the economy stalling and the stock market plunging, short-term rates are probably headed down, not up, in the next few months, and mortgage rates may not have hit bottom yet. But unless we slide into Japanese-style deflation, there are much higher interest rates in our future.

Ahh, that was then.  In the interim, Social Security has not been reformed, Medicare has been tinkered with to help payfor the huge expansion of Federally funded benefits under ObamaCare, and the CBO is hardly sanguine about our long term fiscal prospects, assuming likely modifications to existing law (such as an ongoing "AMT fix"):

With significantly lower revenues and higher outlays, debt held by the public would exceed 100 percent of GDP by 2021. After that, the growing imbalance between revenues and spending, combined with spiraling interest payments, would swiftly push debt to higher and higher levels. Debt as a share of GDP would exceed its historical peak of 109 percent by 2023 and would approach 190 percent in 2035.

Many budget analysts believe that the alternative fiscal scenario presents a more realistic picture of the nation's underlying fiscal policies than the extended-baseline scenario does. The explosive path of federal debt under the alternative fiscal scenario underscores the need for large and rapid policy changes to put the nation on a sustainable fiscal course.

Yet today, unlike 2003, anyone worried that some future government will take the easy path of inflation and debasement is a right-wing partisan blinded by Obama hatred.  Whatever.

Comments

[PD]

I guess we won't be having a Krugman-free 2012 at JOM.

[Sue]

It's just so easy for Tom to do a Krugman v. Krugman piece. It writes itself.

[narciso]

There's other fresh foolishness on tap, tell me what could possibli go wrong here;

http://www.jammiewf.com/2012/ready-for-a-taliban-ambassador/

[narciso]

The voices in his head, get in the way;

http://bigjournalism.com/dloesch/2012/01/01/toure-demonstrates-progressive-entitlement-syndrome/

[Melinda Romanoff]

Let the healing begin.

Gerry Angelo and Bears part ways.

It's a very good day.

[Dave (in MA)]

OT: Did he start them with his eyes?

[Jack is Back!]

narciso,

So, we can now add Toure to the list with Schumer and Baldwin. Wasn't Maher involved in something similar? Its always about them when you are spoiled, pompous liberal - never about your fellow traveler or the engineering science behind the practice.

[narciso]

Well probably, but there's another reason I mention this;

http://bigjournalism.com/arward/2011/10/31/nbc-and-time-contributor-toure-a-911-truther/

[Jim Ryan]

Dang, and here I thought the link was about Kolo Toure, or possibly his brother Yaya Toure.

[Jack is Back!]

Dave(in MA),

Read or heard somewhere that this guy is a German National but immigrated here from Chechnya. So, now you know how he made his bombs. You learn that before you walk over there.

[narciso]

It appears so, wasn't there a colony of Germans not far from Chechnya;

http://www.latimes.com/news/local/la-me-hollywood-arson-20120103,0,6022486.story

[Eric]

If I could pile on: when Dubya was in office, every little downtick in the unemployment rate was predictably followed by a Krugman article explaining why it was only because disillusioned workers were dropping out of the workforce, making the numbers appear better than they were.

Since Obama: not so much.

[Danube of Thought]

What continues to baffle me is this: isn't there anyone at the Times who can point out this stuff to him? Or is he aware of it, but thinks no one will notice?

With TM, it's "fish, meet barrel."

[NK]

TomM-- excellent snark about Herr Doktor Kruman. In fact Krugman was mostly correct in 2003-- Bush was wrong to war spend without offsetting the $100B annual costs with civilian spending cuts. As to Krugman's asshatness about today's $1.5TRILLION annual deficits -- well your snark covered that well enough.

[NK]

DoT-- the "Times" doesn't care. The editrix Abramson only writes for their leftwing MSNBC watching audience. And Pinch? he's preoccupied trying to stay solvent-- it will be a dark day for Pinch when he has to tell the extended Och-Sulzburger nieces and nephews, sorry no college fund for you-- Uncle Artie screwed the pooch.

[narciso]

'No one edits the Times' and Carlos Slim makes
that less and less necessary.

[Soylent Red]

the "Times" doesn't care. The editrix Abramson only writes for their leftwing MSNBC watching audience.

Teh Krugman is the economic version of "the science is settled" for leftists (he's a Nobel Prize winner dontcha know). Every pearl of wisdom emanating from the pen of Krugman is met as if it stands alone, without reference to anything preceding, and without attachment to anything following.

That is how these people choose to live - from one day's talking points to the next.

[Extraneus]

I'm always struck by the immorality of people who advocate large deficits.

[narciso]

The rime of the nexus 6;

http://legalinsurrection.com/wp-content/uploads/2012/01/[email protected]

[Sandy Daze]

Cross-posted off-topic BLEG: I want to assist a colleague (one of the real good guys, a DoN civilian) who has just been posted to Coronado. Is it DoT who lives there? Perhaps whomever/(DoT ?) can offer advice on whom to contact . . .
If you would please send me a note at sandydaze at gmail I will let you know the details or call you if you send a tel number . Thanks in advance.

ABO~OMG,
Sandy

[jimmyk]

I'm always struck by the immorality of people who advocate large deficits.

The irony is that a war or other temporary exigency is precisely the one circumstance in which a deficit makes sense. That was the situation with Bush (though I agree he should have cut domestic spending, but that's true whether or not we had a war). With Barry it's like borrowing to pay for ongoing living expenses. So Krugman is not only inconsistent, he's got it backa**wards.

[Richard Betts is an honest man at the Met Office but he gets little mercy in this thread.]

Gotta read 'Windy' at the Bish's. Solar panels get flayed. Scroll to comment approx #5 for Rick Bradford speaking PuKese.

Oh, L!ink U!nder N!ame if I'm not from disability by risability.
==================

[Jack is Back!]

Isn't the Times trying out the Obama re-election strategy to see how it flies: Just make s**t up and/or lie about it using stats and number you pull out of your a**.

[sbw]

Sndy, ChaCo is in Colorado.

[sbw]

I dropped an "a". Anybody see an "a"?

If you find one, would you tuck it between the "S" and the "n", please.

[rse]

kim-

I had saved what appeared to be a troubling report called "Twenty-First Century Ecosystems: Managing the Living World Two Centuries After Darwin" and looked at it this AM. We have something called the Intergovernmental Platform for Biodiversity and Ecosystem Services going active in April 2012 after several years of planning.

So the intl political class of aspiring managers have climate change, sustainable devt, and IPBES to basically go after it all. Wanted to make sure it was on your horizon as it looks to me as if some of the controversy will be transferred to less visible fora.

LUN is a link to give you the essence that it's about more than the cute and cuddlys.

[Porchlight]

So have we done Iowa predictions yet? I have this weird feeling that Ron Paul will win.

[Jack is Back!]

Kim,

Whenever I want to brighten my day with a little chuckle or two, I always turn to either Tallbloke or Bishop's Hill for the comments. Rick Bradford leads the 2012 race for top snark!

/glad the cat's allright.

[centralcal]

ha ha ha ha, Kim. Rick Bradford's comments were hysterical. Kind of a cross between PUK and Rick Ballard.

[Sue]

I'm going with Santorum as the winner. Paul 2nd, then Romney, Perry, Gingrich. I'm never right so don't bet using anything I say.

[bgates]

I have this weird feeling that Ron Paul will win.

I'm leery of electing someone whose fanatical supporters are at best unconcerned by his unproductive legislative career, and at worst thrilled by some combination of his racism, anti-Semitism, and blame-America-first tendencies.

But since we've already done that, isn't replacing him with someone who is all those things plus an advocate of limited government a step in the right direction?

[Porchlight]

I dunno, bgates, but ABO.

I wouldn't mind seeing a Santorum win either, if nothing else but to send a message. I hate the lemming march to Romney.

[daddy]

I took the test, (guessed wrong on the Stradivarius) and kept expecting "Young Frankenstein" to climb over the ramparts at any moment.

In a second music related question.

A few days back Dennis Miller had on comedian Steve Martin to talk about playing banjo.

Dennis asked, "if a guitar is an axe, then what is a banjo?
Martin neglected to answer.

I'm thinking maybe its a weed-whacker.

So what's your guys answer?

Guitar is to Axe as Banjo is to ______________?

[Porchlight]

Guitar is to Axe as Banjo is to ______________?

Pinking shears?

[Sue]

daddy,

My name elsewhere on the internet is Axey or Axey Stringer. I had someone ask me if I played the guitar. I think I just realized why they would ask me that question.

[Sue]

There is a tweet that says "tomorrow we can all go back to having to look up where Iowa is".

[MarkO]

In my experience, all instruments were called axes. My sax was my axe. It's all about the chops.

[Appalled]

I hate the lemming march to Romney.

A lot of the GOP primary (and caucus) get many of their opinions from talk radio -- either directly or indirectly. If Romney is able to withstand the pretty unanimous barrage against him from Rush, et al, that says a lot about him as a candidate.

Frankly, the flow of lemmings from one ultimately unsuitable not-Romney to another has been a little terrifying. Santorum is a better candidate (I can actually visualize him as a responsible President -- though he is not ever going to be my candidate). But do thye lemmings really know how he is different from Newt or Cain or Perry or Bachmann?

[Soylent Red]

It's all about the chops.

Which you get from "woodshedding".

[Gregory of Yardale]

So, if Krugman is right and deficits don't matter, why is it so important to raise taxes on "the rich?"

[daddy]

Jane, TC, Massachusetts contingent...

This story says "Crash Murray", your Lt Governor, was driving at 100 MPH while looking at storm damage at 5 am.

Keep us posted on "Crash."

[Barbara-Lurking]

Guitar is to Axe as Banjo is to ______________?

Rasp?

[Jane]

I predict Romney, Santorum, Paul, Perry, Gingrich, Bachman.

Daddy it was 108 max. He wasn't looking at anything. It was dark. And he was headed home not toward storm damage.

Hopefully this will take him out of the running for the next governor.

[Porchlight]

Frankly, the flow of lemmings from one ultimately unsuitable not-Romney to another has been a little terrifying.

That flow should tell you something about the intensity of the base's desire not to have Romney as the nominee. Which should in turn tell you something about Romney's ability to beat Obama.

But do thye lemmings really know how he is different from Newt or Cain or Perry or Bachmann?

Of course. Why shouldn't they? I do. Don't you?

You read like a parody sometimes.

[peter]

Guitar is to Axe as Banjo is to ______________?

ADZE?

[Ignatz]

Excellent point Gregory; Krugman defends Keynes but in fact prescribes toxins in precise opposition to and even worse than Dr. Keynes' patent medicine.

I for one thoroughly enjoy TM's repeated jujitsu throwdowns on the helpless and hapless, white belted Krugman.

[Ignatz]

--Guitar is to Axe as Banjo is to ______________?--

Isn't it obvious?
"Chainsaw" = the answer to every problem.

[Sue]

Me too, Iggy. And you know Krugman reads it. He probably googles his name every day. He seems the type.

[Cory]

Another very weak attempt to take down Krugman. Is the different president the only difference between 2003 and 2011? Maybe 10% unemployment and a liquidity trap? Try arguing the economics next time.

[Sue]

Ugh. My beloved Mavericks will be at the WH next week to meet the president. Ugh.

[Thomas Collins]

Daddy, the State Police explanation for the speeding up of the car from around 70 mph to 100 mph is that Murray may have fell asleep at the wheel. I can think of another possible explanation, but this is a family blog, so I'll keep my speculation to myself.

[Appalled]

Porchlight:

I wasn't calling you a lemming.

And I stand by my question, self-parody or not. I'm not sure that many of the voters, following a talk-radio fueled disdain for Romney, quite understand the difference in views between somewhat Huckabee-like Santorum and the more libertarian stylings of Rick Perry. Otherwise, the poll rushings would divide more evenly between other candidates, and have some stickiness when the inevitable bad news ends the surge. Because, seriously, if you like Santorum, you probably should not have liked Newt or Perry. If you liked Cain, you probably should have gone to either Perry or Gingrich, and stayed there. And if you like Gingrich, until you heard about the bad stuff, or were turned off by the grandiosity, Romney would have nmade sense as a choice, had your favorite talk show host not made such a stink about it.

[daddy]

I am enjoying watching Rand Paul answer Shep Smith's questions on FOX. Visually (and personality wise) Shep looks horrible and negative, especially in contrast to Rand Paul. An interesting exchange.

Shep looks like he's got a bad case of indigestion.

Rand is doing a very nice job effectively answering Shep's very pointed criticisms. Go Rand. Take you pop's place please.

[MarkO]

Soylent Red, LOL. Great get. Although, my experiences in the woodshed were varied and sometimes I got chopped.

[Jane]

I can think of another possible explanation, but this is a family blog, so I'll keep my speculation to myself.

But he was alone.

[MarkO]

Shep's grown increasingly dyspeptic. Something he ate?

[Porchlight]

I wasn't calling you a lemming.

I know. I didn't think you were.

I still think you're wrong. The voters know the differences between the candidates. Each candidate surges only as he becomes the next Guy To Beat Romney. That accounts for why the not-Romney vote isn't evenly divided. It has to be focused on one not-Romney candidate or else Romney gets a plurality and wins.

Beyond that, it's purely insulting for you to suggest that GOP primary voters know only what their talk show masters tell them about a candidate. If you really believe that, I have no idea why you read and post here.

[Thomas Collins]

As far as we know he was alone, Jane.

[Dave (in MA)]

Daddy it was 108 max. He wasn't looking at anything. It was dark. And he was headed home not toward storm damage.

He wanted to get home from the rest area before his wife woke up?

[Barbara-Lurking]

Jane,

A friend and I were returning from a dog show in my va. A car kept playing cat and mouse with us as I tried to pass, so I speeded up to put some distance between us. My friend gasped as I finally began to get by him...need I describe what we saw? We got his license # and stopped at the state police barracks to report him. Turned out he was a well-known attorney (NO!). I'm sure he didn't appreciate the hefty fine or the not-so-free advertising!

[Rick Ballard]

"Maybe 10% unemployment and a liquidity trap?"

Now, now - Bozo's Clown Caucus shoveled a trillion to their political pets in the first year of his Maladministration on Krugman's advice (and with a beautiful chart prepared by Romer, probably aided by Corzine, showing a most wondrous drop in unemployment as the result). Liquidity has been an absolute null issue ever since Mad Ben fired up the printing presses and began spraying Bozobucks into the basements of every investment bank on Wall Street. Every investment bank which had made appropriate political contributions to Bozo, at any rate.

Krugman is very good on giving the Dim base a pacifier to suck on every week but he is rather predictable in his weather vane advice.

[Appalled]

Porchlight:

As Abe Lincoln said, you can fool some of the people all of the time. I think we are seeing a lot of that "some" in these surges.

Thomas Collins:

Seems unbelivable that there would be a passenger who would keep quiet, as this accident would have either injured or killed the other passenger. Even with Chappaquiddak, we knew that Mary Jo actually existed...

[Porchlight]

I think we are seeing a lot of that "some" in these surges.

Perhaps. Or perhaps we're seeing it in the slow march to the Romney nomination.

[Soylent Red]

my experiences in the woodshed were varied and sometimes I got chopped.

Don't forget that if you don't spend enough time woodshedding to get your chops you may go someplace and get your "head cut".

[Thomas Collins]

Murray's air bag apparently opened Appalled, but he wasn't wearing a seat belt. He wasn't seriously injured. If a passenger were seriously injured, I would agree that it would be hard to cover that up. But if the passenger was wearing a seat belt and wasn't seriously injured, I could easily see a law enforcement official "look the other way" if the politician was connected.

Admittedly, this is speculation, but all explanations are speculation. Only Tim knows for sure why he was surveying storm damage in the darkness.

[cathyf]

Isn't it obvious? "Chainsaw" = the answer to every problem.

Nah -- it's not the same -- you can tune up a chainsaw...

[MarkO]

"you can tune up a chainsaw..."

But not an oboe.

[Jane]

That's hysterical B-L. I once saw a guy crash into the parked car ahead of him and then the parked car in front of him for the same reason - which we figured out when we approached to see if he was okay.

Howie Carr is having more fun with this than should be allowed. I'm so sick of hearing about Iowa that this is wonderful comic relief.

[Jack is Back!]

One reason Santorum is doing well in Iowa is that the economy is not that big a problem there as it is in other parts of the country. Unemployment is at 6%, bad economies eat lots of pork and even without the breaks most car fuel uses ethanol now.

That leaves social conservative values very much in play. You have to discount the Paul performance due to the mischief makers and the tin-foil hat set he attracts. Plus as everyone ont he upper west side of Manhattan knows, Iowa is "white, rural and evangelical" and doesn't represent America in profile one tiny bit.

[daddy]

Jane,

Wonder who was going faster when crashing,

Lib Politician John Corzine,
or your guy, "Crash" Murray?

Off with the dogs in minus 5 and overcast. Bye.

[J.P. Travis]

This is why Krugman made my annual list of five worst human beings in America: http://www.jpattitude.com/111230.php

I don't think the man is stupid - I think he has a political agenda and doesn't care how much damage that agenda does to the nation.

[matt]

guitar is to axe as banjo is to 1973 Torino on cinder blocks

[Extraneus]

Cleaver?

[Captain Hate]

Nice list JPT but I was surprised Spicoli got the nod over El JEFe.

[Jim Ryan]

Perfect pitch: You throw an accordion and it lands on a banjo and a bagpipes.

[sbw]

No, not very cleaver.

[jimmyk]

Victor Borge on the difference between a violin and a viola: The viola takes longer to burn.

[Jack is Back!]

DoT,

Did you know about this? Pretty tragic. Your neighborhood.

[narciso]

One almost forgets about the health zampolit,, rest assured she doesn't forget about us.

[GMAX]

Is it even news that Paul Krugman is a hypocrite and a liar? Next you are going to tell me that Ron Paul is an antisemite and a lunatic!

[centralcal]

To long time JOMers: On December 22nd I saw something very sad posted on Twitter by one of our formerly frequent commenters. I have not mentioned it for many reasons, mostly figuring it wasn't my place to do so.

Today, I saw 2 more Tweets from this same person, and it kind of breaks my heart and I don't know if I should say something here or remain quiet. This person is after all making family problems "public" on Twitter, so I am asking all of you - am I out of bounds (ethically, any other way) to mention it to you here?

Some might be close enough that they could send a sympathetic email or something. I just don't know what the right thing to do is. Jane? Clarice? Anybody?

[Clarice]

I'm sorry to hear that,cc. I suppose if one twitters her problems they are no longer private so you should feel free to let her know you sympathize.

[DrJ]

CCal,

Why not send it by email to the list?

[Rick Ballard]

Gmax,

I think of the Krugman posts as Tom's version of the "This is your brain on drugs." PSA. Krugman's unremitting mendacity in his role as a NYT propagandist deserves rebuttal.

[Charlie (Colorado)]

Sndy, ChaCo is in Colorado.

"Coronado", not "Colorado".

We don't have a lot of Navy installations up here.

[Kevin B]

I once upset someone by referring to a musician he liked as 'The Lizzie Bordon of guitarists".

[NK]

RickB-- Krugman doesn't need rebuttal; just wait and he'll rebut himself. What Krugmen deserves is SNARK-- and TomM gives him a healthy dose.

[centralcal]

Thanks, Clarice - but I don't have the person's email. I sent Jane the info, since you and she have been around from the early days I thought she might have a contact avenue.

I don't like writing "personal" things to people on Twitter - if ya know what I mean?

To my other JOM friends, don't feel I am being selfishly cryptic - I wouldn't share any personal info about any of you without your absolute approval. Just trying to keep things low key until somebody has a better idea.

[PD]

But not an oboe.

You don't tune a tuning fork, either.

[PD]

accordion

Wedding story: Whoever was in charge of the music for our (first) wedding hired an accordianist. One with a sense of humor. As we filed into the room where the reception dinner was to be served, he was cranking out "Please Release Me."

[Charlie (Colorado)]

You don't tune a tuning fork, either.

But you can tune a fish.

(Oh, come on, someone had to do it.)

[PD]

But can you tune a fish with a bicycle?

[Charlie (Colorado)]

And be nice about oboes, they're cool.

Not quite as cool as bassoons, but still cool.

Which isn't quite as cool as the contrabassoon.

Those stories about Nicaragua are just gossip.

[Sandy Daze]

ChaCo - had the pleasure of a pipeline school at Lowry AFB (Denver), years ago. We were the NAVUTRAFACDETLAFB or some such. Wore the all Navy-blue "gunslinger" uniform back then which was nearly identical to the Aurora Police Department, except for our covers. Lots of unusual reactions from the locals when they thought we were cops driving by. . .

(similar to the uniform portrayed below)

OMG~ABO,
Sandy

[PD]

And let's not forget the english horn.

[Sara]

Heard this morning this bit of enlightenment:

Anybody but Romney is Obama.

Other snippet: Iowa Governor says Ron Paul's numbers have slipped with Iran rattling sabers in the news.

[sbw]

Coronado?

Read, sbw! Read!

[glasater]

C-cal-

I lost my Mom on Christmas eve ten years ago so perhaps it was something alone those lines for our dear friend.

Saw the one tweet mentioning Christmas the earlier tweets have been vaporized...

[Comanche Voter]

Krugman was, is, and ever shall be, a shape shifting poltroon. His opinions depend entirely upon which party is in the White House. When the Dems are there, he gets on his kneed pads and goes the Full Lewinsky. When the Rethugs are in the White House, he's a major model of fiscal prudence.

But in either case, he's a poltroon.

[Charlie (Colorado)]

Lots of unusual reactions from the locals when they thought we were cops driving by. . .

Mostly people saying "Dude, what's a 'Navy'?"